Greece, the weakest link of the euro economy, has been in a relentless credit squeeze since 2010.Its travails are increasing with time despite bail outs and debt restructuring.Post 2008, the flood of liquidity unleashed by central banks world over, has rendered its economy even more vulnerable. Eurozone states, borrowed cheap and squandered it on generous welfare schemes, when they were economically better off. That fiscal madness loaded on them debts up to 350 / 500 % of national GDP.
Text book approach to impose austerity on Greece then followed .Instant austerity is never a morale builder. For the individual nation, austerity imposes prolonged unemployment, destroys current and potential output by eroding the “human capital asset ” of the unemployed and hits at the bottom of the income ladder far more severely. .Sadly though,Germany as the lead economy, had been less than willing to put its shoulders to the problem of its fellow euro nations.
Today the exit of Greece from EU appears even more likely than before.Stressed nations as Greece, must achieve the best variant of fiscal stimulus that boosts job creation and this would need universal support and in particular, from the euro collective. But attitudes are only hardening by the day. The lessons of cyclic depression in world economies are clear- cheap money, excess credit,excess debt and huge deficits.No wonder the RBI governor tends to err on the side of caution ,despite pressures growing on him to lower key rates.
Text book approach to impose austerity on Greece then followed .Instant austerity is never a morale builder. For the individual nation, austerity imposes prolonged unemployment, destroys current and potential output by eroding the “human capital asset ” of the unemployed and hits at the bottom of the income ladder far more severely. .Sadly though,Germany as the lead economy, had been less than willing to put its shoulders to the problem of its fellow euro nations.
Today the exit of Greece from EU appears even more likely than before.Stressed nations as Greece, must achieve the best variant of fiscal stimulus that boosts job creation and this would need universal support and in particular, from the euro collective. But attitudes are only hardening by the day. The lessons of cyclic depression in world economies are clear- cheap money, excess credit,excess debt and huge deficits.No wonder the RBI governor tends to err on the side of caution ,despite pressures growing on him to lower key rates.
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